Organizations Book – B200 Chapter 11 Introduction Organizational structuring and re-structuring are fundamental to the idea of a strategic approach to managing human resources. The main aim of this chapter is to explore how organizational structuring and restructuring impact upon strategic human resource management. In pursuit of this aim, this chapter will examine the potential for organizational re-structuring; the dimensions of structure which are amenable to change; the type of structure which have been designed; the principles underlying design and re-design attempts; and we will also explain the key developments by presenting a new classification of organizational design. Recent years have been witness to a bewildering array of examples of extensive drives to re-structure. For much of the twentieth century there seemed to be an inexorable concentration of power in large corporations. In order to help manage the large organizations, multi-divisional structures were created. Such structures were designed to allow whole-company strategic issues to be handled at the central business decisions relating to marketing, business positioning and the like to the divisional level. At the same time, the growth of larger and larger firms and larger work establishments has halted as the large bureaucracies have with the smaller scale have been ushered-in a whole battery of methods. Flexible organizations, responsive organizations, lean organizations, process organizations, re-engineered organizations, delayered, organizations, empowered, cross-functional teams – these are just a few of the more significant attempts in recent times to restructure the organization of work. Changes of these kinds constitute a key element in human resource strategies and also, in turn, they carry important additional human resource implications. Organizational structures and SHRM: the background Central to the very idea of HRM are the ideas of flexibility, responsiveness, ‘ empowerment and the winning of commitment. On the surface at least, each one of these appears to be the objective of contemporary restructuring attempts. Organizations in recent years have sought to enhance business and customeroriented behaviours and priorities through the creation of Strategic Business Units ( To a large extent the aspirations and principles underlying the recent structural changes seem to reflect those which also underpin the ideas of HRM. There are even the same hard and soft logistic at play. From an organizational re-structuring point of view the the The soft side of the rationale is to be found in the ideas of ‘ ‘ a critique end of escape from bureaucracy. Organizational structuring and re-structuring are intimately intertwined with many aspects of human resource management. Different structures carry implications for career opportunities, for job design and job satisfaction, for learning and development opportunities, for power distance, work content and skill levels. Bureaucracy was used to command and control. Initiative was stifled. In these ways the departure from the bureaucratic control system could be interpreted as actually rather more in tune with the principles of human resource management than would its preservation. An analytical framework To assist the analysis in this and the ensuing chapter a conceptual framework can be suggested, which arises out of the juxtaposition of different dimensions which appear to have been critical in recent re-structuring attempts. This figure uses three cross-cutting dimensions. On the top horizontal axis is the dimension of dimension from base of the figure is the dimension relating to size. For illustrative purposes, a selection of different organizational arrangements are shown. At the bottom left, the bureaucratic form is located to suggest a centralized, directive mode. Ascending the ladder and moving to the right, one progressively moves to divisonalized arrangements, to the use of strategic business units to autonomous, empowered teams. Bureaucracy The key attributes of bureaucracy in the descriptive, social science, sense can be summarized as follows: 1. Officials are given authority to carry out their assigned functions. 2. ensure predictability and routinization of decisions. Small Large Rules/ Command Directive Autonomous Centralized Decentralized Size Bureaucracy Divisionalized Structures SBUs De-structured organizations Downsized/lean enterprise 3. 4. the basis of technical competence. 5. decisions. The model in its totality gave rise to impersonality – this was one of its untended characteristics. It had the advantage of overcoming nepotism, favouritism and arbitrary decision making. The principles seemed well suited to the administrative needs of the new democratic states and the emerging large industrial enterprises. Three sets of ‘unanticipated consequences’ and ‘dysfunctions’ of bureaucracy have been pointed out by various organizational analysts. 1. behaviour and defensive routines. 2. Division of task and responsibility can elevate departmental goals above whole system goals – that is, lead to suboptimizing behaviour. 3. acceptable standards can become transformed into targets and behavioural norms. Rules and procedures can also become ends in themselves. Downsizing and lean production Faced with rapidly changing environments many employers have responded by downsizing and in the process have also retreated from long term commitments to employees, which the internal labour market model allowed and facilitated. In the United States it is estimated that over one million middle managers lost their jobs as organizations flattened organizational structures. The strategy of many companies over the past few years has been to reduce their size; out of the business same or even more work; and re-focus activity on the core business. Senior executive were rewarded for so doing; share prices tended to rise when these steps were taken and top management salaries increased. Devolved management: divisionalization and strategic business units Perhaps the most obvious way to respond to the catalogue of problems associated with bureaucracy is to seek in one way or another to Be that as it may, for the past 20 years or so the cycle would seem to have been very much on the downswing – that is, in favour of decentralized units. The tendency began with a wholesale switch to divisional zed structures. Hamel and Prahalad argue that senior managers should ‘seek to identify and exploit the interlink ages across units that could potentially add value to the corporation as a whole. The devolution has been seen as part of a move to enable personnel practitioners to play a greater strategic role and yet the logical consequence of devolution is to make the implementation of the strategy extremely difficult. ‘De-structured’ organizations By this term we mean to cover the collection of types of structural innovations variously described as high performance organizations, knowledge creating companies, empowered teams, ad hoc, boundaryless, and process-based organizations – among other similar terms. Despite the range of titles, the underlying ideas are similar: they point to a departure from traditional bureaucratic forms with their formal rules, hierarchy of office and vertical communication, and circumscribed role responsibilities and celebrate instead the breaking down of internal barriers and formal structures. The new watchwords are teams communications, the minimization sparse use of rules. With some variance in emphasis, the same basic tents can be found underpinning the so-called companies The Boundaryless Organization and sub-title in Breaking the Chains of Organizational Structure. No longer will organizations use boundaries to separate people, tasks, processes and places; instead, they will focus on how to permeate those boundaries – to move ideas, information, decisions, talent, rewards and actions where they are most needed. This amounts to a boundaryless structures. The organizational attributes which formerly conferred advantage can, under the new conditions, constitute disabling impediments. can be depicted in the two lists below: Old success factors: - - - - New success factors: - - - - For example success under contemporary conditions resides in the ability of a company to create new knowledge, disseminate it throughout the organization, and embody it in new services and products. Japanese companies NEC, Kao and Sharp management to create new markets and develop many new products. Making choice about organizational structure What are the factors affecting the choice of the organization’s structure? 1. These include the desire to hold individuals and sub-units accountable for the use of resources and the achievement of targets. Lines of reporting and the use of job descriptions are the kind of devices used for this purpose. Another criterion is usually to ensure the flow of communication. 2. reasons other than the technical reasons suggested above. Top managers may judge it safest simply to follow the ‘industry recipe’. 3. exerting an influence on organizational structure. Rarely, if ever, is this a determining factor, but the scale required in technological investment, in say an oil refinery, is likely to have some influence in the nature of the organization which is formed in order to exploit those technological assets profitability. 4. the benefits of a transnational organizational resource is also likely to influence organizational structure. Organizational ‘size’ as a possible contingent factor has long been a topic of contention. In practice, managers are usually faced with a need to balance series of divers and sometimes conflicting considerations. Centrally, there is a need for balance between differentiation and integration. Formal organizations are notable for the way in which they divided-up tasks and responsibilities also require some mechanisms for co-ordinating and controlling in order to pull these separate activities together A classic dilemma is between structuring in the basis of management function or on the basis of products. Under the former, each function marketing, finance, and sales It is particularly favoured by small and medium sized enterprises. The emphasis is upon technical quality and cost control. On the positive side it is the least complex of structures; it allows economies of scale; enables in depth skill development, achievement of functional goals and clear accountability. On the negative side it is slow to respond to environmental change, is poor at encouraging horizontal co-ordination and communication and is not conducive to innovation. It also tends to encourage a restricted view of organizational overall goals. Product-based structures are more likely to be found in large organizations and in environments of moderate to high uncertainty. They are more able to respond to unstable environments, and the units should be better able also to tailor themselves to client’s needs. On the other hand, such structures tend to involve some duplication of resources, they fail to fully exploit economies of scale in functional departments and, if fully deployed in a pure from may sacrifice in-depth technical competence.
‘corporate’ level while developing other major
‘downsized’. Along
‘new’ managerial
‘flatter’
ownership’ of organizational problems by as many employees as possible,
SBUs).
‘hard’ aspects are to be found in the drastic cuts in ‘headcounts’,
‘downsizing’ and the ‘outsourcing’.
‘empowerment’ the
learning’ that is required to cope with multiple demanding tasks, and the
teamworking’ that is invoked. Both sets of facets appear to constitute, above all,
‘centralized’ to ‘decentralized’; on the vertical axis is the
‘directive’ to ‘autonomous’; and on the horizontal axis at the
(SBUs) and then
A clear division of work with stipulated boundaries to responsibilities.
Referral by role occupants to formal (written) rules and procedures which
A well-defined hierarchy of authority.
Appointment to posts arranged not through patronage or bribery but on
A system of rules with formal (written) documentation of actions and
The first derives from the emphasis on control. This can prompt rigidity of
The second focuses on the implications for the behaviour of subunits.
And thirdly, as a result of the impersonality of rules the minimal
‘take costs
’; increase productivity by having fewer people undertake the
‘decentralize’.
(preferably cross-functional), lateral
(if not outright removal) of hierarchy, and the
‘high performance work systems’ and the ‘knowledge creating
’.
‘paradigm shift’ towards
In summary from the contrast
Size.
Role clarity.
Specialization.
Control.
Speed.
Flexibility.
Integration.
Innovation.
, according to Nonaka and Takeuchi (1995), the source of corporate
such as Canon, Matsushita,
have been identified as special in their use of knowledge
The factors which could be said to constitute ‘rational’ considerations.
It has to be realized that particular structural forms can also arise from
Various contingent factors such as technology have been argued as
In a global marketplace, the need to ‘act local’ and yet take advantage of
(differentiation) and yet
(integration).
such as production,
has its own hierarchy.
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